If someone told you a few years ago that a JPG would sell for almost $70 million, you would have laughed.
But...it happened. The digital artist known as Beeple sold a Non-Fungible Token (NFT) of his work for $69 million at Christie’s. Everydays: The First 5,000 Days was the first virtual NFT artwork sold at a major auction house.
NFTs aren’t only for artists and art collectors, though. In 2021, we’re seeing these digital assets transform into a powerful tool for eCommerce businesses.
“For being an unknown commodity in some ways and having an unknowable amount of value to a customer, NFTs present an efficient opportunity: value-to-others thinking and zero physical operations. The persisting freight and supply chain issues highlight the value of immediate consumables, activities, and the emotional story a brand lets you tell yourself.”
- Grace Clarke, Growth Marketing Strategist
In this post, we’ll dive into what NFTs are and share some ideas from experts on how you can use them in the eCommerce environment.
What is an NFT?
First things first: What is an NFT, anyway?
NFT stands for Non-Fungible Token, and it represents a digital asset recorded on the blockchain. Unlike dollar bills, gold, or cryptocurrencies, NFTs are interchangeable because each token has a unique value (hence the non-fungible part.) In economics, fungibility refers to the property of a good or a commodity whose individual parts and units are interchangeable and indistinguishable.
As digital representations of properties, each NFT is one-of-a-kind, so they are considered digital collectibles.
NFTs can be anything digital—a photo, a video, a GIF, etc. And while anyone can copy or download that file (just like there are many copies of physical art), buying an NFT gives you proof of ownership of the digital asset.
Even though the concept of NFTs might look complicated, the logic behind them is quite simple: artists get a platform on which they can sell their art, and buyers can support their favorite artists, build their collections, and/or earn from the difference between the buy and sell price.
NFTs have been around since 2014 when artist Kevin McCoy minted the first NFT named “Quantum.” Today, we’re witnessing a boom in the market for digital collectibles. According to a study released by NonFungible.com, the NFT market tripled in 2020, with the total value of transactions increasing by 299% year over year to more than $250 million.
And things are just starting to heat up: Data from DappRadar shows the NFT space generated $10.67 billion in trading volume during Q3, an increase of 704% from the previous quarter.
The NFT craze made digital art extremely popular. Names like CryptoPunks, Art Blocks, and Bored Apes are everywhere.
However, brands and eCommerce retailers are also dipping their toes into the NFT space.
Today, you can own some of the NBA’s best moments, buy a “Transformative Taco” from Taco Bell, or grab a “1 Byte Favourites,” — which are digital images of pizza by Pizza Hut Canada.
But these aren’t just for legacy brands. Ecommerce retailers of all sizes can get creative and use NFTs in new, interesting ways.
7 ideas for using NFTs in your eCommerce business
To get a peek inside the world of NFTs and understand how eCommerce businesses can unlock the potential of digital assets to provide value for their customers, we talked to several experts in this space.
According to Zaira Vallejo, Associate Strategist at Redscout, NFTs should be perceived as a status symbol:
“Think of NFTs less as an asset that could potentially accrue value and more as a status symbol or access to a community...one that enables them to opine, vote, participate in a brand's development (like product innovation, beta testing, etc.) and to brand perks (like discounts, early access, events, connecting to other brand customers).”
Before considering whether you should use NFTs for your business, you must understand that it boils down to creating real value for customers.
“I don’t think there’s a one-size-fits-all here. Brands might make some short-term money selling NFTs of their product, logo, etc., but there needs to be a lot more thought out to drive real value. Experimenting with loyalty programs as NFTs, gating exclusive drops to NFT holders, and collaborating with existing NFT communities could all be interesting to explore,” says strategist Packy McCormick.
Despite all the hype around NFTs, eCommerce businesses have barely scratched the surface potential of ways to use them. Let’s take a look at a few of them.
1. Research and development
Getting insights into what customers think in the R&D process is priceless. Businesses can use NFTs to reward customers for participating in surveys and beta-testing or give specific NFT holders exclusive rights to get a vote in a brand’s product development roadmap.
According to Chris Cantino, Partner at Color Capital, this is a great way to get meaningful insights and to track and maintain customer relationships. NFTs can provide participants with early access to product releases and even potential profit sharing.
5/ R&D
— Chris Cantino (@chriscantino) September 10, 2021
Brands exchange NFTs for insights on product dev: pain points, marketing claims, flavors, materials and more.
Participants receive NFTs granting early access to product releases and potential profit sharing. Brands easily track and maintain these key relationships.
2. Pre-launch products
Building hype before launching a new product remains one of the top priorities for every brand.
Giving early access NFT tokens could help generate buzz and get great exposure before a new product launch. As a result, you could build a solid base of early-bird customers.
Unlike in the past when merchants would have to mint and sell NFTs through a third-party marketplace, Shopify now makes it possible for merchants to sell NFTs directly through their storefronts. The Chicago Bulls were the first to do so, selling NFTs that highlighted the team’s iconic six World Championship rings.
If you’ve spent 1 minute on the internet this year, you’ve seen a lot about NFTs. @Shopify we are making it easier for our merchants to sell NFTs directly through their stores, with one of the first being the @ChicagoBulls NFT store. https://t.co/Qv2wKO7RCS
— Harley Finkelstein (@harleyf) July 26, 2021
3. Selling digital goods
NFTs as an additional revenue stream? Sounds good, right? Whether you’re selling purely digital goods or leveraging them as a complement to a physical offering, NFTs can help eCommerce brands deliver unique and exclusive brand experiences.
That’s exactly what streetwear brand The Hundreds did with its Adam Bomb Squad NFTs, which sold out just four days after they were made available. They’re not stopping there, though. Bobby Kim, the brand’s co-founder, says they’re now looking into ways to tie NFTs into branded experiences, too.
“Sell less physical products and sell more digital assets! Retailers can also look into Proof of Attendance Protocol (POAPs) to prove you attended an experience (like a digital ticket stub as a memento).”
- Bobby Kim, Co-founder of The Hundreds
4. Loyalty programs
One of the most obvious use cases of NFTs for eCommerce businesses is loyalty programs.
“I’m most excited by the opportunity for a brand to take advantage of NFTs as loyalty devices in the same way we think about physical or digital membership cards,” said strategist Michael Miraflor.
He went on to say that NFTs can be issued by brands on a regular basis as "proof of purchase" or "proof of membership" and customized rewards can be airdropped to NFT holders on a regular basis.
These rewards might be things like:
- discounts and offers
- access to events
- early access to new products
- private community access (discord, telegram, whichever platform makes the most sense for the brand)
On this note, NFTs can also provide a competitive edge to brands through loyalty-focused efforts.
“Every eCommerce brand should be thinking about a strategy for utilizing NFTs. The potential for customer loyalty that comes with NFTs is massive—there can be tokens that unlock rewards, early trial of new products, and community-building amongst customers. Playing in the NFT space brings cultural relevancy—and this kind of relevancy is priceless for today’s brands to maintain a competitive edge.”
- Jaime Schmidt, Partner at Color Invests
5. Education and unparalleled customer experience
Having great customer support is table stakes in 2021, but having customers who know your product so well they can onboard new members should be the ultimate goal for every business.
Using NFTs to turn customers into brand ambassadors is another interesting idea from Chris Cantino.
“Upon demonstrating exceptional knowledge of a brand’s product, customers could receive NFTs in exchange for onboarding newbies into the community or providing customer support. This can be exponentially more impactful than a brand employee doing the same thing.”
- Chris Cantino, Partner at Color Invests
6. Community-building
Humans crave belonging. It’s hard-wired into our brains. It’s no wonder businesses invest a lot into building a community around their brand. The good news: NFTs can help with these efforts.
“What I love about NFTs is the utility of the tokens themselves and how creative brands can get. Brands can use them to connect with their loyal community and even do it retroactively to people who have already purchased, engaged, signed up to a list, etc. Perks can include things like ad space for token holders on the company website, socials, or community, discounts on products, and even access to events,” says investor Vincenzo Landino.
Seeing people use NFTs as avatars across the internet is just another proof point that the sense of belonging and exclusivity are appealing, which makes NFTs a great marketing strategy.
Landino went on to say that because of the provenance of NFTs, luxury goods brands can benefit and strengthen their communities by issuing NFTs for their goods. At the end of the day, brands can use these NFTs to help their community feel like a tight-knit club, an exclusive opportunity, and a point of pride by allowing them to signal that they hold that token.
7. Special access to drops
“Drop culture” has become increasingly popular in the last couple of years. The sense of scarcity they create leads to long lines in front of stores. Using NFTs to give customers exclusive access to special drops can help an eCommerce brand share its story in a unique way while further promoting the scarcity angle.
“Think about sneaker culture, for example. People wait in lines and queue up for sneaker drops in their apps. Imagine a retailer selling an NFT that granted holders access to exclusive drops. This enables a secondary market. Say I'm a sneakerhead who buys a Nike token, but then tires of the game or sours on the brand. I could sell my token to some other excited person who wants in. The way smart contracts are set up, Nike could make a royalty on that secondary sale.”
- Chris Vasquez, CPO at AWeber
NFTs open up great opportunities for getting revenue via a secondary market.
“Imagine the secondary market for a product (Trove, RealReal, etc.); now the master brand (e.g., LVMH) could continue to get paid if the item changes hands down the line,” said Darren Herman, PE at Bain Capital.
Bonus idea: Your products in the metaverse
The internet is flooded with headlines about the metaverse. A simple explanation of the term is that it’s a virtual space within digital environments such as online games, social media, and virtual reality that you can explore with other people who aren’t in the same physical space as you.
While many perceive it as the future iteration of the internet, one thing's for sure — with NFTs, it’s slowly becoming a reality.
“NFTs can also be taken into the metaverse. Customers can show off the brand in their virtual homes or galleries. Wear branded products on their avatar, etc.,” said writer Michael Keenan.
Matt Schlicht, CEO of Octane AI, agrees that NFTs hold great potential:
“NFTs are fascinating because they represent objects in the metaverse. Today NFTs are just rows in the database, but what is coming next is the 'game' that makes it so you can interact with everything and they can interact with each other. Because NFTs are on the blockchain they are public and equally accessible by everyone which means anyone can make anything interact in any way they want at any time for everyone,” he said.
According to Darren Herman, the future is on our doorstep, and soon buying a physical product will unlock the 3D version in the metaverse.
“It’s only a matter of time until real-world purchases are unlocked in digital worlds (metaverse) or games. If I buy the new Lebrons, it should unlock them in NBA2k21,” he said.
NFTs and eCommerce
It’s never been a more exciting time to be in eCommerce. NFTs hold significant potential, and it’s up to businesses to find creative ways to leverage them and take customer experience to the next level.
